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Thursday, 23 October 2014

Take advantage of tax break, says Cumbrian accountants

Chartered accountant Armstrong Watson is advising clients to take advantage of the temporary increase in the annual investment allowance (AIA).

Nigel Holmes photo
Nigel Holmes

The two-year tax break, effective from January 1, allows businesses to claim 100 per cent relief on qualifying capital expenditure up to £250,000.

It was announced by Chancellor George Osborne in his Autumn Statement in December and was in effect a U-turn as only nine months earlier the Government cut the AIA from £100,000 to £25,000.

The move is designed to encourage investment in plant and machinery.

Nigel Holmes, director of corporate tax at Carlisle-based Armstrong Watson, said: “This will have an impact on many businesses planning capital expenditure. It is welcome news for SMEs looking to invest more than £25,000 in plant and equipment.”

He advises any business considering a major capital outlay to ensure that the expenditure date falls between January 1, 2013, and December 31, 2014.

But he cautioned: “Care needs to be taken when looking to maximise the benefit of the increased allowance due to some fairly complicated transitional rules.

“The available AIA will be pro rata for accounting periods that straddle the date of change.

“There will be some accounting periods [ending this spring] where the hybrid rate will be made up of three rates including the previous £100,000 limit.”

There may also be opportunities to claim AIA when refurbishing or even purchasing a building.

For buildings bought after April 2012 there is a requirement for the seller and purchaser to agree the amount of acquisition and disposal proceeds for capital allowances purposes.

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